Shopee closing down its India operations (+ve)
- Shopee is closing down its India operations in view of global market uncertainties.
- Largely expected but the confirmation is positive for its future profitability, watch out for quarterly EBITDA trends
- Maintain BUY on Sea Ltd with unchanged TP of US$256
Shopee is closing down its India operations in view of global market uncertainties. Shopee was launched in India in October 2021 as part of an international push that saw it expand into Europe. This comes weeks after Shopee announced it was pulling out of France and after India banned Sea’s popular gaming app “Free Fire”.
Largely expected but the confirmation is positive for its future profitability. Shopee often cross-sells e-commerce products to its gaming customers initially. After Free-Fire ban by the Indian government, Shopee has rightly scaled back on its ambitions in India. Both e-commerce market leaders in India, Amazon and Flipkart, are not profitable yet so we are relieved with this confirmation by the company. While Shopee is very keen to grow in new markets in Latin America like Brazil, Mexico & Argentina, we are waiting for more clarity on its entry in Poland and Spain.
Watch out for Shopee’s EBITDA losses in existing markets and new markets. Management has already guided for EBITDA breakeven for Shopee in existing markets of Southeast Asia & Taiwan excluding HQ costs. Shopee had ~US$280m EBITDA losses each from existing and new markets excluding US$300m HQ costs in 4Q21. We expect EBITDA losses from existing markets to reduce each quarter in 2022 while we project US$300-350m EBITDA losses each quarter from new markets. So overall, we expect Shopee to report stable EBITDA losses in 2022.